Body shops knock reimbursements
Auto body repair shop owners told lawmakers they are reimbursed by insurers at an average rate of about $40 per hour — which they said is the lowest in the nation — and pressed for legislation regulating minimum labor rates.
“In 2010 when I opened my business, insurers were reimbursing consumers a labor rate of $40 an hour. Eleven years later, the same insurers are reimbursing consumers the same labor rate of $40 an hour,” Brian Bernard, owner of Total Care Accident Repair in Raynham, said. “Eleven years with a zero percent increase in that rate. In the same period, your insurance premiums have increased 48 percent.”
Representatives and senators on the Joint Committee on Financial Services took the testimony Wednesday in a preview of a debate that is expected to take place before a new special commission by the end of this year.
Bernard, the Alliance of Automotive Service Providers of Massachusetts and others supported a handful of bills dealing with the issue, including H 1111 from Rep. James Hawkins, which would require that insurers reimburse auto body shops at a minimum rate equal to the rate at the time the Insurance Reform Act passed in 1988, adjusted for inflation. Afterward, the rate would be adjusted based on the Consumer Price Index.
According to the U.S. Bureau of Labor Statistics, $1 in 1988 is equal to $2.36 of buying power in 2021.
Hawkins said he ran an auto body shop before becoming a teacher and was “quite involved” as a member of the Rhode Island Auto Body Shop Association. Back then, about 25 years ago, the labor rates insurance companies paid to shops was about the same as it is today.
“I just had my truck serviced at the Chevrolet dealer, that’s $125 an hour for labor. I dropped off my RV to be serviced this week and that’s $175 an hour. And we’re only paying the auto body shops $40 an hour,” he said. “And that’s not what the employees get, that’s what the shop gets.”
Christopher Stark, executive director of the Massachusetts Insurance Federation, urged lawmakers not to return to “government price-fixing” more than a decade after Massachusetts officials deregulated the automotive insurance market from a “fixed and established system” to “managed competition.”
“We’ve learned our lesson… Massachusetts, through that entire time of fixed and established, was consistently the fifth, the seventh, highest premiums in the nation,” Stark said. “But after we made those reforms and ended that type of government price-fixing, we fell to 15th and we remain 14th.”
The Legislature’s special commission is supposed to hold at least two public hearings “in geographically diverse areas,” of the state and is expected to file a report with its findings and recommendations by Dec. 31.